1095 Market Street 415.558.6377 Assessor's Block/Lot: 3703/059 Zoning District: C-3-G Staff Contact: Corey A

.~P~o covNTro~ u ~ z SAN FRANCISCO w ~'' ~f PLANNING DEPARTMENT o of`as o~s~

1650 Mission St. Letter of Determination Suite 400 San Francisco, CA 94103-2479 February 29, 2016 Reception: 415.558.6378 Sue Hestor Fax: 870 Market Street, Suite 1128 415.558.6409 San Francisco, CA 94102 Planning Information: Site Address: 1095 Market Street 415.558.6377 Assessor's Block/Lot: 3703/059 Zoning District: C-3-G Staff Contact: Corey A. Teague,(415) 575-9081 or [email protected]~ Record No.: 2015-018012ZAD

Dear Ms. Hestor:

This letter is in response to your request for a Letter of Determination regarding the distinction, if any, in how the Planning Code defines and regulates hotels and hostels. Specifically, you request a determination as to whether the Planning Code distinguishes between guest rooms and guest beds in relation to the project at 1095 Market Street.

T'he subject property is within the C-3-G Zoning District, which requires a Conditional Use Authorization for any new or significantly expanding hotel use. A hostel is not defined as a distinct use in the Planning Code, rather it is considered to be a hotel use. On October 12, 2010, the Planning Commission granted a Conditional Use Authorization (Case No. 2009.11000 -Motion No. 18199) to convert the subject building to a hotel hostel with up to 94 guest rooms and associated restaurant, bar, and nightclub uses. As noted in the market demand study submitted with the application, the project proposed up to 484 beds. On November 21, 2013, the Planning Commission granted a three year extension of the performance period for the project (Case No. 2013.12850 —Motion No. 19027). While the number of proposed guest rooms was called out in each motion as part of the project description, the Planning Commission did not place any conditions on the approval related to the overall number of guest rooms.

Your letter references multiple areas of the Planning Code that use the number of hotel rooms as a trigger or limit for hotel uses, and requests a determination as to whether hotel beds may be substituted for hotel rooms in Planning Code requirements. Any Planning Code trigger or limit based on the number of hotel rooms cannot be substituted with beds. However, the C-3-G Zoning District includes no limit on the number of hotel hostel rooms permitted, nor do a specific number of rooms trigger any additional land use authorizations. Additionally, the specific Planning Commission review criteria for hotels under Planning Code Section 303(g) do not include any criteria or other guidance related to the number of rooms provided.

www.sfplanning.org Sue Hestor February 29, 2016 870 Market Street, Suite 1128 Letter of Determination San Francisco, CA 94102 1095 Market Street

On September 11, 2014, the Project Sponsor submitted Building Permit Application No. 201409116118 for an updated proposal which included 203 guest rooms with 239 beds. The Planning Department initially approved the subject permit on June 22, 2015. The Planning Department approved a subsequent revision of the same permit on November 13, 2015. This permit was issued by the Department of Building Inspection on November 17, 2015.

In reviewing this permit, the Zoning Administrator only had to determine if the scope of work under this permit was in "general conformity" with the Conditional Use Authorization (Motion Nos. 18199 & 19027). The Zoning Administrator determined, and verifies such determination by this letter, that the updated scope of work under Building Permit Application No. 201409116118 was in general conformity with the original Conditional Use Authorization because 1) the Conditional Use Authorization was required for the hotel use itself, and neither the Planning Code nor the Planning Commission approval provided conditions related to the total number of rooms, 2) the updated scope of work continued to fall under the land use definition of a hotel, 3) there was no increase in gross floor area of the subject building or the floor area ratio on the subject property (i.e. no physical expansion of the project), 4) there was no significant increase in guest occupancy (in fact, the number of beds was reduced from 484 to 239), and 5) the updated scope of work met all other conditions of approval and applicable Planning Code requirements.

Please note that a Letter of Determination is a determination regarding the classification of uses and interpretation and applicability of the provisions of the Planning Code. This Letter of Determination is not a permit to commence any work or change occupancy. Permits from appropriate. Departments must be secured before work is started or occupancy is changed.

APPEAL: If you believe this determination represents an error in interpretation of the Planning Code or abuse in discretion by the Zoning Administrator, an appeal may be filed with the Board of Appeals within 15 days of the date of this letter. For information regarding the appeals process, please contact the Board of Appeals located at 1650 Mission Street, Room 304, San Francisco, or call (415)575-6880.

Sincerely,

Scott F. Sanchez Zoning Administrator

cc: Corey A. Teague, Assistant Zoning Administrator Carly Grob, Planner Ian Lewis Cynthia Gomez Neighborhood Groups

SAN FflANCISCO PLANNING D6P4RTMENT SUE C. HESTOR Attorney at Law 870 Market Street, Suite 1128 San Francisco, CA 94102 office (415) 362-2778 cell (415)846-1021 hestor(c~earthlink.net

December 4, 2015

Scott Sanchez ~~~ F`~~12 1/ Zoning Administrator 1650 Mission Street Sth fl San Francisco CA 94103

Request for Letter of Determination - Number of Rooms allowed -Hotels and Hostels(1095 Market)

Dear Zoning Administrator Sanchez:

My client UNITE HERE Local 2 requests a Letter of Determination on whether the Planning Code regulates the number of hotel rooms or the number of beds. Local 2 asserts that Hotels and hostels are defined and regulated by the number of guest rooms available to be rented. The Conditional Use requirement for hotels becomes irrelevant if Commission approval of a 94 room hostel can be changed to a 303 room hotel by Department staff because the number of beds remains the same.

ACTIONS REGARDING 1095 MARKET STREET CONVERSION FROM OFFICE TO HOTEL

Planning Code motions 18199(10/14/10) and 19027(11/21/13) approved conversion of 1095 Market Street from office use to a hotel/hostel with up to 94 rooms. Exhibit B plans for both motions show 94 hotel/hostel rooms. Both motions require Recordation of conditions with a limit of 94 hotel rooms.

Building Permit 2014.09.11.1185 includes the project description "change of occupancy from office to hotel. New (202 -stricken and overwritten) 203 hotel rooms." Carly Grob signed off on behalf of Planning Department on 6/22/15 for:

change of use from office to hotel w/ground floor retail. Construction of(202 -stricken and overwritten) 203 hotel rooms and roof deck..."

The permit fora 203 room hotel was issued 11/17/2015. UNITE HERE Local 2 filed an appeal which was rejected by Board of Appeals because 1095 Market had been approved as a conditional use. The most recent Conditional Use approval was 11/21/13. The application fora (202)203 HOTEL ROOM was filed 9/11/14 -SIGNIFICANTLY AFTER the 12/21/13 deadline to appeal the 94 HOTEL ROOM project.

From Cynthia Goldstein I understand your position to be

the permit (for 1095 Market) was issued pursuant to the Conditional Use Authorization even though the number of rooms has changed. He said while the number of rooms has increased, the overall number of beds has decreased and there's been no increase or decrease in the size of the building, just the interior configuration. Scott also said Planning determined that the change in the number of rooms was insubstantial conformity with the CU given that the overall use is consistent. He explained that there are often minor changes made to projects after the CU hearing and before the site permit is approved. December 4, 2015 - page3

Article 8 -Mixed Use Districts

This article similarly defines and limits their location tourist hotels by ROOMS -

SEC. 890.46. HOTEL, TOURIST. A retail use which provides tourist accommodations including guest rooms or suites, which are intended or designed to be used, rented, or hired out to guests (transient visitors) intending to occupy the room for less than 32 consecutive days. This definition also applies to buildings containing six or more guest rooms designated and certified as tourist units, under Chapter 41 of the San Francisco Administrative Code. For purposes of this Code, a "tourist hotel" does not include a tourist motel..... Tourist hotels shall be designed to include all lobbies, offices and internal circulation to guest rooms and suites within and integral to the same enclosed building or buildings as the guest rooms or suites.

Individual mixed use districts that permit tourist hotels control the size of the hotels by limits on the number of rooms. One such District-which permits hotels but limits number of rooms -

WSOMA MIXED USE-OFFICE DISTRICT

845.49 Tourist Hotel (§ 890.46) - P up to 75 rooms

SSO -SERVICE/SECONDARY OFFICE DISTRICT

818.78 Small hotels of 75 rooms or less are permitted in this District only as a conditional use. Any such conditional use authorizations requires a conditional use finding that disallows project proposals that displace existing Production, Distribution and Repair (PDR) uses.

PLANNING CODE AL50 REGULATES RESIDENTIAL HOTELS BASED ON ROOMS

The Planning Code also regulates RESIDENTIAL HOTELS based on the number of guest rooms, including in Mixed Use Districts

SEC. 890.47. HOTEL, RESIDENTIAL. A hotel, as defined in Chapter 41 of the San Francisco Administrative Code, which contains one or more residential hotel units. A residential hotel unit is a guest room as defined in Section 203.7 of Chapter XII, Part II of the San Francisco Municipal Code (Housing Code), which had been occupied by a permanent resident on September 23, 1979, or any guest room designated as a residential unit pursuant to Sections 41.6 or 71.7 of Chapter 41 of the San Francisco Administrative Code. Residential hotels are further defined and regulated in the Residential Hotel Unit Conversion and Demolition Ordinance, Chapter 41 of the San Francisco Administrative Code. December 4, 2015 -page 5

The Planning Commission granted a Conditional Use to convert 1095 Market Street from an office building to ahotel/hostel set a limit of 94 rooms. Many of the rooms included bunk beds, a typical HOSTEL configuration. They did not have bathrooms in each room. Atypical HOSTEL configuration. Staffing included a local non-profit. Ten months after the 11/21/13 approval, on 9/11/14 project sponsor filed fora 203 room hotel with bathrooms in each room. The non-profit?

Planning staff signed off on the building permit change because the number of beds had not increased. The number of guest rooms more than doubled to 203 ROOMS. The Conditional Use appeal period had long expired.

Planning staff and the Zoning Administrator interpreted the PLANNING CODE to allow an increase in the number of hotel rooms because the number of hotel beds was approximately the same as the hostel which included bunk beds.

U NITE HERE Local 2 requests

(1) A Letter of Determination on whether the hotel beds may be substituted for hotel rooms in tourist hotels -both Commission approval of a Conditional Use and all other requirements of the Code. How is this applied throughout the Planning Code and where other San Francisco appear to link to the Planning Code definitions.

(2) That permit 2014.09.11.61185 be undone by whatever means possible because it exceeded the 94 room limit on a tourist hotel at 1095 Market imposed by the Planning Commission.

FURTHER NOTE -

FROM TO DOCUMENTS ATTACHED TO THE Building Permit Planning Department classification of this site may have caused confusion to other departments:

Handwritten notes from Carey, the Fire Dept. contact, read "this is for a residential hotel."

Similarly on 11/16/15 in calculation of fees that the SFUSD receives on a change of use: SFUSD payment of fees to convert shows what appears to be fee to convert -with credit for prior use -calling out conversion to RESIDENTIAL hotel.

Respectfully submitted,

Sue C. Hestor for UNITE HERE Local 2

cc: Ian Lewis Cynthia Gomez SUE C. HESTOR Attorney at Law 870 Market Street, Suite 1128 San Francisco, CA 94102 office (415) 362-2778 cell (415)846-1021 [email protected] ~ECEIVE~ December 9, 2015 ~~ - D/8 p/2 Z~~ DEC 0 9 2015 Scottsanchez ,.;~ ¢~/~~ ~ ~~.~~. CITY &COUNTY OF S.F. Zoning Administrator 4 PLANNING DEPARTMENT 1650 Mission Street 5th fl ~ ~-~`' ~ ~` ~ RECEPTION DESK San Francisco CA 94103

Supplement 12/4/15 Request for Letter of Determination -Number of Rooms allowed - Hotelsand Hostels(1095 Market) ~jR~ Dear Mr. Sanchez: ~37D31

am transmitting the following:

• Unite Here Local 2's check for $645 the above Letter of Determination.

Documents referenced in that letter:

• PKF Consulting, Trends in the Hotel Industry. Northern California, August 2015

• Wells Fargo Securities, Equity Research, July 26, 2012

Both of these samples of industry publications describe hotels by ROOMS

• SF City Controller, Amendment to Tourist Hotel Conversion Ordinance: Economic Impact Report, File 071528 -February 13, 2008

• 2011 Annual Inventory of Large Tourist Hotel Rooms, 2011.0021U - 3/3/11

am not providing San Francisco Code sections, including to the Planning Code, describing hotel rooms.

Further questions please contact me. Additional industry documents, Ian Lewis at 415 608 3875.

Since appeal of the issuance of Building Permit 2014.09.11.1185 was rejected, despite permit increase from 94 hostel rooms to 201 hotel rooms allowed by Planning Department ,the developer can immediately start construction using this permit despite inconsistency with Planning Commission motions 18199 (10/14/10) and 19027 (11/21/13). Appellant urges that this determination be issued - or other action taken to suspend work constructing the guest rooms -relatively soon. ,~ Si ~ erely, ~ ~IC ~~-~I _ ~

Sue C. Hestor

cc: Ian Lewis 0

IN THE HOTEL INDUSTRY Northern California

August 2015 Budget Accuracy Benefits All by: Robert Mandelbaum and Viet Vo

ince 2001, PKF Hospitality Research, a missed their total revenue and profit targets CBRE Company (PKF-HR), has assessed by just 0.4 percent. the accuracy of hotel budgets. Over the past 14 years, one trend has become very predictable. During times of industry HISTORICAL BUC}GETACClJi2ACY ____ prosperity, hotel budgets are extremely Perc~f CJi4terenc~e -nrtir,-,i ;o~wr~r~d 1'ea #3~~~'-^'~d t?s€ta~~' accurate. 119b _.. _...... __... _...... _..... ___..

~ ,~a .+_ ~ ...~,.~,ixa ~,,.,,,.~...... ,ix.m ~f~ p ~mm~ f~ uring depths of the 2001 and 2009 psi , . D the -7~ ',~ ~ ~ , industry recessions, hotel managers „ ... ~s underestimated their revenue levels by an .s»a _ .~~, ...' T,.~ .... i average of 10.4 percent, while the profit ~~ 21X.t 'rCs 3fAi bus 2UOd 3Mt ..nls 2x9 ~~sa 2tl~t 2Jti rJ~3 ~i~ deficits averaged 23.4 percent. Conversely, --e.+a.evaa~np F++.~.«.m „..ay. d<~vti. ~.aax<.. re ~uw. when the industry has been in periods of PPCF ^=wt ~+~EtS growth, the budget variance for revenues sarc~e+wctro~r~rrt...~aleeRE~a :.,' has been a positive 0.6 percent on average, while profit goals were exceeded by 1.4 percent. For the purpose of this analysis, The analysis of hotel budget accuracy is profits are defined as net operating income consistent with PKF-HR's self-analysis of the (NOI) before deductions for capital reserve, accuracy of our Hotel Horizons° forecasts of rent, interest, income taxes, depreciation, U.S. lodging industry performance. Our and amortization. accuracy assessments have consistently shown that forecasts of lodging performance This trend of budget accuracy during are most accurate during the growth periods periods of prosperity was demonstrated of the business cycle. PKF-HR's latest once again in 2014, another strong year for forecasts call for continued real RevPAR U.S. hoteliers. Comparing 2014 budgeted gains through 2018. This implies that to actual performance, hotel managers industry forecasts, as well as property-level

TRENDS is compiled and produced by PKF Consulting ~ CBRE Hotels ("PKF ~ CBRE"). Readers are advised that PKF ~ CBRE does not represent the data contained herein to be definitive. Neither should the contents of this publication be construed as a recommendation of policies or actions. Quotation and reproduction of this material are permitted with credit to PKF ~ CBRE. Pnge 1 budgets, will continue to be accurate for the an annual occupancy level of 62.2 percent. foreseeable future. This would be the first time the annual occupancy level would exceed the long-run For participants in the lodging industry, average since the depths of the 2009 accurate budgets and forecasts provide recession. After such a lofty predictability. For investors and lenders, accomplishment, hotel managers expected predictability implies less risk. For owners, that they would be empowered to raise their predictability leads to better management of room rates more aggressively in 2014. cash flows and investments. For operators, Accordingly, they budgeted for a strong 5.2 predictability (in theory) means fewer percent increase in average daily room rates headaches. (ADR) for the year. Unfortunately, ADR at the hotels in the study sample fell a little As general managers, controllers, and short of the budgeted mark and grew just directors of sales prepare their budgets and 5.0 percent in 2014. marketing plans for 2016, we present the results of our most recent look at the budgeting accuracy of U.S. hotel operators. au~~~T~,ccu~,~~~r 2Q14_ BUL7GETVS_ RC'I'UAL—ALL HOfi~LS': __ From PKF-HR's TrendsOO in the Hotel Industry P~ro~nt vhanri~ -- a~13 t~ 2Q9 a database, we identified 495 operating ~:~ statements that contained both actual and h _y - -•~ 5.8'ti budgeted data for 2014. Using these RGOIflB Rav4nu4 T ,4

statements, we compared the revenues and ra6i11 K.NBPl1N ~;~ expenses projected for 2014 with what was actually earned and spent during the year. .41%°

•Busl~,q. rpui~ml 1104:`. SwN'~NP~QM, tl iNMAi~~b'h~ENa "'~b~ EWiY'gcgVlMrieMwsnR bMv1M,Nica~i».bAf, NpN::e!.o^. uMrra~OaEm. 6awa~r:arFNpyge~awrrr shl CBRGNeeMs ~1~ CEF~4iU?flS'

2014 HOTEL Bt ~OGET_.__.._ ACCURACY_ Per~.nt Gifh~t~n~ Ikcitt~! Com~ark,ci T E ~:6g~~p~~ a ~:

~:ou ._ __ _ _~._.__.. ___. Missing ADR growth was somewhat e perplexing given the fact that the subject R 74'W hotels were able to accommodate more fl:~ guests than anticipated. In 2014, occupied ~~~ rooms for the sample grew by 2.0 percent. dXawP/d AIJR 7tiffern4 TdNttrwnun. E.rpwSwK WcMs^. Rwrw Rnnx+m This is greater than the budgeted increase of Nq~r.IInepba!va~am~t~MO WAWtaw. ^'. Ntmld~9awVwwMe~;n'~, ~+nmal. kwgR,elNny,4Ra~swk4u~a NnwtlAgbe 1.5 percent. Underestimating occupancy P4CF ceec ~+r~?ci.s Sws~:D1~N.wAIW~'MeNrenl CLfi~1{aW gains, but overestimating ADR growth, has been a consistent pattern since 2010.

Occupancy Overcomes ADR The net result was a rooms revenue (RevPAR) excess of 0.3 percent compared to budget. In 2013, while hotel managers were Concurrently, total hotel revenue exceed preparing their budgets for 2014, the U.S. budget by 0.4 percent. This implies that the lodging industry was on its way to achieving combined growth in revenue from food and

Fortunately for hotel operators, and their owners, the greater than expected revenue growth was more than sufficient to cover the expense overage and allowed these properties to surpass their budgeted profit levels. On average, the hotels in our sample actually exceeded their 2013 budgeted NOI goals by 0.5 percent.

What To Budget for 2016

According to the June 2015 edition of Hotel Horizons, PKF-HR is projecting that a 6.8 percent increase in RevPAR will lead to a b.b percent gain in total hotel revenues for 2016. Concurrently, operating expenses are forecast to rise by 3.8 percent. This should result in a 12.9 percent improvement in profits.

Given this positive market forecast, historical trends indicate that the odds are favorable for U.S. hotels to achieve their budgeted targets once again in 2016. * **

Robert Mandelbavm and Viet Vo work in the Atlanta office of PKF Hospitality Research, a

REPORT OF ROOMS BUSINESS BY LOCATION

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR SAN FRANCISCO $279.87 $273.16 2.5% 92.8% 95.2% -2.5% $259.61 $259.99 -0.1% SAN FRANCISCO AIRPORT 199.95 190.06 5.2% 91.8% 91.9% -0.1% 183.65 174.68 5.1% SAN JOSE/PENINSULA 196.47 173.17 13.5% 84.0°/a 86.4°/a -2.8% 165.11 149.68 10.3% OAKLAND/EAST BAY 147.13 128.84 14.2% 90.2% 90.3% 0.0% 132.76 116.29 14.2% MONTEREY/CARMEL 377.18 360.63 4.6% 88.3% 90.1% -2.0% 333.01 324.94 2.5% CENTRAL VALLEY 86.07 82.42 4.4% 76.4% 76.2% 0.3% 65.74 62.78 4.7% SACRAMENTO 112.45 105.26 6.8% 76.3% 75.5°/a 1.1% 85.85 79.51 8.0°/a MARIN COUNTY 190.80 174.99 9.0% 91.9°/a 93.8% -2.0% 175.26 164.06 6.8% NAPA COUNTY 302.33 295.67 2.3% 82.9% 77.9% 6.4% 250.70 230.38 8.8% SONOMA COUNTY 178.70 170.35 4.9% 87.7% 88.9% -1.3% 156.75 151.45 3.5% OTHER NORTHERN CALIFORNIA 100.86 94.63 6.6% 79.4% 80.6% -1.6% 80.06 76.30 4.9°/a

OVERALL AVERAGE $202.44 $191.79 5.6% 86.3% 87.4% -1.3°/a $174.68 $167.69 4.2%

REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $175.00 $261.28 $248.55 5.1% 89.7% 91.4% -1.9% $234.39 $227.19 3.2% $125.00 TO $175.00 149.33 136.48 9.4% 87.7% 87.4% 0.3% 130.91 119.33 9.7% $75.00 TO $125.00 101.01 92.92 8.7% 82.6% 83.3% -0.8% 83.43 77.37 7.8% UNDER $75.00 59.02 54.25 8.8% 71.3% 71.8% -0.8% 42.05 38.95 8.0%

OVERALL AVERAGE $202.44 $191.79 5.6% 86.3% 87.4% -1.3% $174.68 $167.69 4.2%

REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER 400 ROOMS $247.32 $237.33 4.2% 90.6% 91.8% -1.3% $224.16 $217.95 2.8% 250 TO 400 ROOMS 240.84 229.65 4.9% 88.5% 90.4% -2.1% 213.12 207.62 2.7% 150 TO 250 ROOMS 202.97 188.36 7.8°/a 85.3% 85.8% -0.6% 173.06 161.54 7.1 °/a UNDER 150 ROOMS 140.32 131.40 6.8% 82.1% 83.2% -1.2% 115.26 109.30 5.5%

OVERALL AVERAGE $202.44 $191.79 5.6% 86.3% 87.4% -1.3% $174.68 $167.69 4.2%

SOURCE: PKF CONSULTING ~ CBRE HOTELS

REPORT OF ROOMS BUSINESS BY LOCATION

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR UNION/NOB/MOSCONE $289.06 $281.08 2.8% 92.8% 95.1% -2.4% $268.33 $267.40 0.3°/a FINANCIAL DISTRICT 297.39 283.25 5.0% 94.4% 95.8% -1.4% 280.88 271.43 3.5% FISHERMAN'S WHARF 267.83 270.21 -0.9% 94.3°/a 96.8% -2.5% 252.65 261.51 -3.4% CIVIC CENTER/VAN NESS 202.16 205.98 -1.9% 88.0% 92.6% -4.9% 177.86 190.66 -6.7%

OVERALL AVERAGE $279.87 $273.16 2.5% 92.8% 95.2% -2.5% $259.61 $259.99 -0.1%

REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $200.00 $285.83 $278.76 2.5% 93.0% 95.3% -2.5% $265.68 $265.66 0.0% $150.00 TO $200.00 177.65 178.64 -0.6% 89.6% 93.2% -3.8% 159.19 166.43 -4.3%

OVERALL AVERAGE $279.87 $273.16 2.5% 92.8% 95.2% -2.5% $259.61 $259.99 -0.1%

REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER 400 ROOMS $274.38 $266.02 3.1% 93.8°/a 95.8% -2.1% $257.35 $254.91 1.0% 250 TO 400 ROOMS 304.30 298.47 2.0% 91.9% 94.8% -3.1% 279.72 283.04 -1.2% 150 TO 250 ROOMS 276.39 276.61 -0.1% 90.0% 92.1% -2.2% 248.78 254.64 -2.3% UNDER 150 ROOMS 253.18 253.54 -0.1% 88.1% 93.0% -5.2% 223.07 235.67 -5.3%

OVERALL AVERAGE $279.87 $273.16 2.5% 92.8% 95.2% -2.5% $259.61 $259.99 -0.1%

SOURCE: PKF CONSULTING ~ CBRE HOTELS

REPORT OF ROOMS BUSINESS BY LOCATION

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR SAN FRANCISCO $265.12 $246.95 7.4% 87.0% 86.6°/a 0.4% $230.69 $213.95 7.8% SAN FRANCISCO AIRPORT 185.44 169.63 9.3% 85.6% 85.0% 0.7°/a 158.73 144.12 10.1% SAN JOSE/PENINSULA 195.49 173.08 12.9% 82.4°/a 81.8% 0.7% 161.05 141.53 13.8% OAKLAND/EAST BAY 134.19 119.85 12.0% 83.2% 79.5% 4.6% 111.64 95.29 17.2% MONTEREY/CARMEL 299.86 290.67 3.2% 76.0% 74.3% 2.3% 227.85 215.85 5.6% CENTRAL VALLEY 86.06 81.62 5.4% 72.4°/a 70.9% 2.2% 62.33 57.87 7.7% SACRAMENTO 111.72 105.16 6.2% 75.6% 73.6% 2.7% 84.44 77.41 9.1% MARIN COUNTY 163.30 148.61 9.9% 80.9% 81.5% -0.7% 132.15 121.08 9.1% NAPA COUNTY 260.66 246.41 5.8% 74.2% 74.5% -0.4% 193.50 183.67 5.4% SONOMA COUNTY 152.78 142.90 6.9% 80.5% 79.5% 1.3% 123.01 113.55 8.3% OTHER NORTHERN CALIFORNIA 90.03 84.98 5.9% 68.7% 66.5% 3.3% 61.84 56.52 9.4%

OVERALL AVERAGE $187.96 $174.98 7.4% 80.8% 79.7% 1.5% $151.94 $139.38 9.0%

REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $175.00 $242.67 $225.30 7.7% 84.4% 83.9% 0.5% $204.73 $189.12 8.3% $125.00 TO $175.00 139.22 127.28 9.4% 79.9% 79.0% 1.2% 111.29 100.54 10.7% $75.00 TO $125.00 97.27 89.29 8.9% 77.6°/a 75.4% 2.9% 75.49 67.31 12.1% UNDER $75.00 55.97 51.98 7.7% 67.9% 64.2% 5.7% 37.99 33.38 13.8%

OVERALL AVERAGE $187.96 $174.98 7.4% 80.8% 79.7% 1.5% $151.94 $139.38 9.0%

REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER 400 ROOMS $238.41 $220.98 7.9% 86.1% 85.1% 1.2% $205.34 $188.13 9.1 250 TO 400 ROOMS 221.46 207.89 6.5% 82.3% 81.8% 0.6% 182.20 170.09 7.1 150 TO 250 ROOMS 182.14 169.08 7.7% 79.5% 78.5% 1.2% 144.72 132.75 9.0% UNDER 150 ROOMS 126.92 117.90 7.7% 76.6% 74.8% 2.4% 97.18 88.14 10.3%

OVERALL AVERAGE $187.96 $174.98 7.4% 80.8% 79.7% 1.5% $151.94 $139.38 9.0%

SOURCE: PKF CONSULTING ~ CBRE HOTELS

REPORT OF ROOMS BUSINESS BY LOCATION

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR UNION/NOB/MOSCONE $278.51 $260.55 6.9% 87.2% 86.7% 0.6% $242.82 $225.78 7.5% FINANCIAL DISTRICT 283.98 266.99 6.4% 87.8% 86.8% 1.1% 249.23 231.68 7.6% FISHERMAN'S WHARF 230.30 212.77 8.2% 88.3% 88.9°/a -0.7% 203.29 189.08 7.5% CIVIC CENTERNAN NESS 178.60 160.65 11.2°/a 83.6% 84.0% -0.5% 149.30 135.01 10.6%

OVERALL AVERAGE $265.12 $246.95 7.4% 87.0% 86.6% 0.4% $230.69 $213.95 7.8%

REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $200.00 $271.13 $252.94 7.2% 87.2% 86.9% 0.3% $236.41 $219.79 7.6% $150.00 TO $200.00 158.44 140.86 12.5% 84.0% 82.3°/a 2.1% 133.07 115.86 14.9%

OVERALL AVERAGE $265.12 $246.95 7.4% 87.0% 86.6% 0.4% $230.69 $213.95 7.8%

REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY

AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVENUE PER AVAILABLE ROOM 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER 400 ROOMS $260.67 $243.81 6.9% 88.6% 87.1% 1.7% $230.88 $212.29 8.8% 250 TO 400 ROOMS 291.51 269.10 8.3% 84.0% 86.2% -2.5% 244.93 231.89 5.6% 150 TO 250 ROOMS 256.96 234.47 9.6% 87.6% 86.3% 1.4% 224.98 202.42 1 l. l U NDER 150 ROOMS 232.12 216.83 7.0% 80.3% 84.0% -4.4% 186.45 182.12 2.4%

OVERALL AVERAGE $265.12 $246.95 7.4% 87.0% 86.6% 0.4% $230.69 $213.95 7.8%

SOURCE: PKF CONSULTING ~ CBRE HOTELS

Northern California

Commercial 31.3%

San Francisco

Group 1 2.5% Other III~~~~«~ 5.0% Leisure ~~ :~ 50.0% Commercial 32.5%

Lodging: Holding Unto Labor Efficiencies StsE1'f`ic~,~ C'.laair~,~es I.~

NONSUPERVISORY LABOR EFFICIENCY. The hotel industry has steadily improved nonsupervisory labor efficiency for 25+ years. There were X2.2 Lodging nonsupervisory personnel per ioo occupied rooms in 1986, but by 2oii this figure was just 5i.6 and we estimate it will decline to 50.E by year-end 2oi2, a 30% improvement over the period (Figure i). Better product design, revenue management, group sales, and a decline in the unionized hotel labor population (Figure 4) allowing for increased scheduling flexibility and job sharing are the source of the improvement. SUPERVISORY EFFICIENCIES MATERIALIZE. Supervisory personnel averaged 9.5 people per ioo occupied rooms over 1986-200 with little variability aside from the period around September i1, 2oii (Figure 2). Since 2008 however, supervisory staff levels have averaged 8.g people per ioo occupied rooms and we estimate it could finish 2oi2 at 8.i, a i5% improvement in efficiency. Owners and managers appear to be doing a solid job holding supervisory staffing levels fairly constant in fact the face of growing demand. NECESSITY IS THE MOTHER OF INVENTION. The majority of the improvement in nonsupervisory labor efficiency appears to follow periods of turmoil in the industry (e.g., 1988-iggi and 2ooi-2oo3). The data implies hotels are forced to improvise when faced with tough times. Moreover, the bulk of the efficiencies in staffing levels appear to be retained when market conditions improve. Case in point, during the real estate construction boom in the i98os, staff per ioo rooms increased i8%. As the cycle turned against hotels and real estate, staff per ioo rooms declined io% from their mid-i98os peak and held firm at this reduced level through 2000. The events of September ii, 2ooi, necessitated service levels be addressed again and staffing was promptly reduced and declined through 2005(Figure i). • STAFFING CHANGES HISTORICALLY LAG DEMAND BY 6o DAYS. We analyzed 25 years of data and found monthly changes in hotel employment staffing provided no insight on future changes in room demand. We did however find a strong coincident relationship (RSQ=42%) between changes in staffing and room demand and explanatory power improved further when we reversed the analysis to assess whether changes in room demand explained future staffing levels i-, 2-, 3-months in the future (RSQ=49~, 530, and 53% respectively). No surprise, we also found a strong inverse relationship (RSQ=49%) between the rolling 6-month year/year changes in mass layoff events (lagged on month) and changes in room demand. We conclude staffing changes historically lag changes in room demand by about 6o days. Brand standards, avoidance of understaffing, inability to forecast contraction in the advance booking window or increases in group meeting attrition/cancellation, and union labor rules are the likely reasons behind the delayed response time. • UNIONS LOSING THEIR GRASP. The portion of hotel employees covered by collective bargaining agreements (Figure 4) has declined from io% in 1983 to 5-6% by 2oii. The absolute level of membership at year-end 2oii was 500,000, on par with its 29-year average but down sharply from its 2008 peak of 623,000. Jeffrey J. Donnelly, CFA,Senior Analyst The persistent declines in union penetration implies most new jobs in the industry are non-union. j ~Il~.d<~r~uc:ll.y(~~.Y~el]s.fai•~«.com Dori Kesten, Associate Analyst (GY^) 60,3-4`~'3:i! d ori.l~esfen<„~v~ll ~f~a~:•~o.cs;tts

Please see page 4 for rating definitions, important disclosures and required analyst certifications Wells Fargo Securiries, LLC does and seeks to do business with companies Together we'll go far reports. As a result, investors should be aware that covered in its research r~:; the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision. .~ WELLS FARGO SECURITIES,LLC Lodging EQUITY RESEARCH DEPARTMENT

Discussion

Figure i. Non-Supervisory Labor Efficiencies(Accommodation Employment)

HOTEL NON-SUPERVISORY LABOR EFFICIENCIES (1973A-2012E)

75 1,700 z 0 70 1,500 ~, >. ~ 0 0 c.a iE ~ 65 1,300 Z•'a m o ~ a ~ 3 ~ 0 60 1,100 c o 3 m N 3 C ~ z~ a 55 900 0 0 N

50 700 M V~ CO f~ eO~ O N M~~(O 1~ OO~ O N ch~~ CO I~ aO Q~ O N M V~(O 1~ aO~ O r N f~1~1`1~1~f~f~op op op op Op Op Op Op op 00 ~~~~~~~~~070000000000 r ~~~.—~—rrr ~ rrr~~—~~rrr r~ ~~~re—NNNN NNNNNNNNN

D Non-Supervisory Employment (OOOs) Per 100 Occupied Rooms

Source: Bureau of Labor Statistics, PriceWaterhouseCoopers Hospitality Division, Smith Travel Research, and Wells Fargo Securities, LLC estimates

Figure 2. Supervisory Labor Efficiencies(Accommodation Employment)

SUPERVISORY LABOR EFFICIENCIES (1973A-2012E)

12 300

N C y 10 225 °fai o N O ~ O Q d z. ~ 8 150 ~ o v 0 y Q ~c Zy oO a .. in a 6 75 0 0 N

4 M ~~fD l~oO ~O NMI In CO f~ a0 ~O NM ct l!')CO I~00 ~O NC'7 V ~fD I~ 00~ O W N I~ I~I~f~f~ I` f~Op op op op op op op Op Op Op ~ ~~~~~ ~~ ~~0000000000 ~ O) ~ p) O~ O) ~ ~ ~ ~ ~ ~ ~ 6)~ ~ O) 6)~ ~ ~ ~ ~ ~ ~ ~ ~ O O O O O O O O O O O O O r r .-- r r r r r r ~ r r r ~ ~ e— ~ r r r r r ~ ~ ~ ~ r N N N N N N N N N N N N N

D Supervisory Employment (OOOs) —Per 100 Occupied Rooms

Source: Bureau of Labor Statistics, PriceWaterhouseCoopers Hospitality Division, Smith Travel Research, and Wells Fargo Securities, LLC estimates

z WELLS FARGO SECURITIES,LLC Lodging: Holding Onto Labor Efficiencies EQUITY RESEARCH DEPARTMENT

Figure g. Staffing Changes Lag Demand

Change In Room Demand & Nnn-Supervisory Staff 15% - Staffing lags room demand, especially when 10% demand is weakening...

0% --, --- - -~ __ ~- ~ i (5%) ~ Labor (10%} Efficiency Gains (15%) OO 6~ O N M ~ Lf) CD I~ OO O) O N M ~ ~ CO I~ aO O~ O N Gp Op ~ ~ ~ O~ O~ ~ ~ ~ ~ 6~ O O O O O O O O O O C C C C C C C C C C C C C C C C C C C C C C ~ C C 7 7 7 7 7 ~ 7 ~ 7 7 7 7 7 7 7 7 7 ~ 7 > > 7 7 ~ 7

Non-Supervisory Workers Room Demand

Source: Bureau of Labor Statistics, Smith Travel Research, Wells Fargo Securities, LLC estimates

Figure 4. Unions Losing Their Grasp On Hotels Hotel Staff Union Population &Penetration Collective Bargaining Agreements ("CBA") 645,000 11.0°/a

610,000 10.0%

575,000 9.0% n m ~ a o ~ ~,m ~ T 540,000 8.0% '~Q '~o ~- m 0o m o ~ 505,000 7.0% n ~ ov o 0 0 N ~ Z" 470,000 6.0% N

435,000 5.0%

400,000 4,0% M ~ f~ 6) M ~ f~ ~ M ~ 1~ O~ Op 00 OO OO ~ O~ ~ Q~ Q) O O O O O ~ ~ ~ d~ O~ O) O) ~ Q) O O O O O O r ~ ~ r r ~ ~-- ~ ~ N N N N N N

Source: Bureau of Labor Statistics, Unionstats.com, Wells Fargo Securities, LLC estimates

3 WELLS FARGO SECURITIES,LLC Lodging EQUITY RESEARCH DEPARTMENT

Required Disclosures

Additional Information Available Upon Request

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4 WELLS FARGO SECURITIES,LLC Lodging: Holding Onto Labor Efficiencies EQUITY RESEARCH DEPARTMENT

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Amendment to Tourist Hotel Conversion Ordinance: Economic Impact Report

=ile No. 071528

February 13, 2008 .~;;:~~° City and County of San Franeiseo 'ry:.,-u,:~..d Office of the Controller -Office of Economic Analysis

The proposed legislation would prohibit the conversion of tourist hotels containing more than 100 rooms into condominium units, making the August 2005 temporary conversion ban permanent. The legislation is projected to have a neutral to positive impact on San Francisco's economy. The legislation allows the Planning Commission to issue exemptions for conversion of up to 500 hotel rooms for two years after approval of the legislation; after that time, further conversions may be allowed if the applicant can demonstrate that such conversion will not reduce the supply of Large Tourist Hotel rooms available within the City. The legislation also softens the restriction for currently-existing mixed-use hotels, allowing conversion of hotel rooms into fractional residences (meaning units are divided and sold as weekly or monthly shares) at two of the City's 86 large tourist hotel properties.

Even with very high resident spending assumptions, hotel uses generate nearly finrice the direct and indirect spending of condominium uses, while hotel use supports more than five times the direct and indirect jobs in the San Francisco economy compared to condominium uses. The difference is largely attributed to the lower density of the converted condominiums, as well as the different spending profiles of visitors compared to residents, with a greater portion of visitor spending captured within the local economy. Hotel uses generate more than twice the annual tax revenue of condominium uses, primarily because hotel occupancy is taxed at a relatively high rate. However, converted condominiums would result in one-time transfer tax revenues to the General Fund from the initial sale of the condominium units. Highlights Risk Mitigation

San Francisco's tourism and hospitality industries Despite the overall positive are strong and a major segment of its economic economic impacts of the legislation, base. Visitor spending on a variety of categories mitigating actions can be undertaken including lodging, dining, retail, entertainment, to reduce the risk of any negative and transportation drives this sector of the outcomes: economy. • Because real estate markets are cyclical, consider revisiting • A condominium unit requires the physical space legislation periodically (at each of multiple hotel rooms. This economic analysis is economic cycle) to determine if based on maximum conversion allowed under it is still needed. the ordinance of 500 hotel rooms, equating to 125 converted condominiums. • Better define the supply of Large Tourist Hotels to guide the The impact of reduced direct spending by visitors Planning Department when it at 500 hotel rooms is estimated at about $77.5 evaluates potential future million annually, made up in part by $35 million conversions. spent annually by residents of the 125 units, but Consider expanding the still a comparative net loss of $42.5 million in legislation to prohibit shared direct spending annually. ownership at all large tourist hotels, instead of exempting 500 hotel rooms generate about $118 million in only two mixed-use projects annual direct and indirect spending in San constructed before the adoption Francisco, or about $74 million more than of the ordinance. spending by the residents of 125 condominiums. The legislation could discourage Visitors to 500 hotel rooms support nearly 1,700 new hotel development because direct and indirect jobs in the San Francisco it restricts a potential exit economy, or about 22 jobs per $1 million in direct strategy if the developer/investor spending, significantly more than residents of 125 grossly miscalculated the condominiums who would support 255 direct and market or a negative externality indirect jobs, or about 7 jobs per $1 million in impacts demand (e.g., 9/11). direct spending. The OEA suggests allowing a The difference is largely attributed to the lower two-year window to exempt new density of the converted condominiums, as well hotels from the ordinance to as the different spending profiles of visitors leave an out, and not compared to residents. discourage investment in the City. ECONOMIC SCORECARD

Highly Moderately Moderately Highly Negative Negative Neutral Positive Positive Impact Impact Impact Impact Impact

City Economy

Employment

Owners of Large Tourist Hotels

Owners of St. Regis and Four Seasons Hotels INTRODUCTION

Hotel Conversion: In August 2005, the Board of Supervisors passed an History and Proposed ordinance amending the San Francisco Administrative Code to prohibit the conversion of hotel rooms to for-sale Ordinance condominiums for an 18-month period. In January 2007, the Board passed an ordinance extending the ban for an additional six months.

The proposed legislation would make this temporary ban permanent, by amending the Administrative Code to add Section 41 F, which prohibits conversion of Large Tourist Hotels (defined as having more than 100 hotel rooms) into condominium units. The legislation allows the Planning The proposed ordinance Commission to issue exemptions for conversion of up to makes the 2005 ban 500 hotel rooms for two years after the legislation is permanent, with 500 approved. After two years, the Planning Commission may additional conversions further approve hotel conversions, if the applicant can the allowed in the next two demonstrate that such conversion will not reduce supply of Large Tourist Hotel rooms available within the years. City. Since the legislation's introduction in 2005, 1,112 rooms have been added to the San Francisco hotel market', a 3.3% increase in inventory.

The legislation softens the restriction for certain currently- existing mixed-use hotels, defined as a tourist hotel that includes residential uses. In these cases only, conversions An exemption for are allowed provided that "occupancy is restricted to not per year or in fractional ownership more than 30 consecutive days 90 days aggregate per year." This restriction allows the conversion applies to only two of hotel rooms into residential units, provided the units are properties in the city: the fractionalized, meaning they are divided into weekly or Fou►' Seasons and the monthly shares, sold as deeded ownership fractions, and St. Regis. marketed toward individuals seeking a more affordable alternative to a full vacation home.

Includes the 550-room Intercontinental set to open on February 28, 2008. Controller's Office Office of Economic Analysis The OEA has identified only two properties in the City that meet the mixed-use definition of the legislation: The 277- room Four Seasons and the 260-room St. Regis. The legislation would allow conversion of an unlimited number of hotel rooms to shared-ownership at these two properties. However, the shared-ownership conversion exemption would not apply to the City's other large hotel-only properties. Nor would it apply to any new hotel that subsequently wished to convert to fractional ownership.

2 Controller's Office Office of Economic Analysis ECONOMIC IMPACT FACTORS

Introduction To help inform the policy debate, this section of the report describes aspects of the legislation that the OEA projects will affect the San Francisco economy in material and measurable ways. The following provides a discussion of the assumptions used in the economic and fiscal impact assessment presented in the next section.

San Francisco's hotel inventory currently comprises 33,375 hotel rooms, in 219 hotel properties located throughout the City2. Most of the inventory is located in hotels with more than 100 rooms; the legislation applies only to hotels of this size.

These large tourist hotels have approximately 80% of the inventory (27,046 rooms), concentrated in 86 properties (40% of total). However, as noted above, the ordinance allows limited conversions at two mixed-use hotels (comprising 537 rooms), lowering the inventory of affected rooms to 26,509 in 84 properties.

The ordinance will impact the owners of these 84 properties by preventing a change in use from hotel to for- sale residential. The ordinance does not prevent these owners from changing a hotel to some other non- residential use allowed by the relevant zoning controls, such as office, hospital, or commercial. Nor does it prevent new hotel developments from containing amixed-use for- sale condominium component as part of the initial development. This latter phenomenon is a recent strategy used by hotel developers to raise equity and reduce risk.

The proposed legislation affects the supply of hotel rooms in the City by preventing large hotels from removing rooms from inventory and converting them into residential units. This economic impact analysis quantifies and compares the relative economic impact of hotel uses with condominium uses, assuming demand is constant for either use.

In the short run, reducing the supply of hotel rooms in the City would not have a major effect on the economy, as

2 San Francisco Hotel Segregation Report, September 2007, Smith Travel Research.

Controller's Office 3 Office of Economic Analysis long as the supply of hotel rooms remains sufficient to accommodate visitor demand. That is, visitors who would have otherwise stayed at the converted hotel room instead stay at another comparable property within the City. A 2006 OEA report3 on the six-month extension of the prohibition was based on this perspective, because the time frame of that legislation was limited, and the city was only slowly emerging from a prolonged downtown in its tourism industry. For these reasons, the OEA at that time determined that it was unlikely that allowing condominium conversions would significantly reduce the number of occupied hotel rooms in the city.

The present legislation is different, however, because it is permanent. Over the longer term, reductions in the supply of hotel rooms in San Francisco will put additional upward pressure on hotel prices, reducing the number of visitors to the city and limiting the growth of businesses and non- profits that rely on visitors for their revenues.

In the long run, the financial incentive to convert hotel rooms to condominiums is not solely dependent on the health of the tourism industry, but on the relative profitability of condominiums and hotels. If condominiums are able to consistently generate a higher rate of return than hotels, then there will be a consistent pressure for conversion. Conversely, if hotels generate higher returns, the pressure to convert will diminish. In reality, conditions fluctuate and what is feasible in the market today may not be in the future.4 This raises a policy question of the relative economic impact of hotel rooms and converted residential properties.

There are, therefore, four key economic impact factors involved in the proposed legislation:

1. The impact of reduced spending by visitors at hotel rooms that have been converted to condominiums;

3 httq://www.sfpov.orQ/site/uploadedfiles/controller/oea/061536.pdf 4 For example, San Francisco's hotel market is currently very strong: hotel properties have traded at record per- room prices, and occupancy and room rates have increased in the past few years and will likely continue in the near-term due to a record number of advanced bookings through the Convention and Visitor's Bureau, and continued demand from tourists. The current investment climate generally favors continued use as a hotel, versus converting multiple rooms into individual units. However, a few years ago, when the hotel market was relatively weak compared to the strong housing market, conversion from hotel to condominium was more financially feasible than it is today. 4 Controller's Office Office of Economic Analysis 2. The impact of spending by residents at condominiums created by hotel room conversions;

3. The impact of the construction required for the conversion itself;

4. The impact on existing hotel owners by taking away a possible exit strategy (or a way to raise capital through the conversion of rooms). However, this factor is difficult to quantify because there. are other ways for an owner to exit the hotel business, such as selling the property.

These factors are detailed in this section, and a complete analysis is presented in the next section.

Scenario Assumptions The legislation would limit the conversion of tourist hotel for Economic and rooms to residential units, replacing a number of potential visitors with residents. The spending profile and occupancy Fiscal Impact patterns of hotel visitors are different from those of condominium residents. In addition, because multiple hotel rooms are required to convert to a single condominium unit, A single condominium the density, or number of people occupying the same requires the physical amount of space, decreases with a use change from hotel space of multiple hotel to condominium. rooms; the number of To estimate the relative economic impact of the proposed people occupying the legislation, the OEA modeled two alternatives, a Hotel same space decreases Scenario and a Condominium Scenario. The appropriate with a use change from economic factor to analyze and compare is the relative hotel to residential spending by visitors versus residents, the occupants of the space, and how this spending is recycled through the City's economy. In addition, tax revenues accruing to the City will vary by use; the fiscal impact at the end of this report quantifies those differences.

Table 1 summarizes the assumptions used in the two scenarios in terms of the number of units and hotel rooms, occupancy, and resulting annual visitors or household population. The scenarios are based on the assumption that 500 hotel rooms (the maximum allowed under the The spending profile and legislation) are converted to 125 condominium units, or four occupancy patterns of hotel rooms per condominium unit. hotel visitors are As indicated, applying market occupancy and density different from those of factors to the 500 hotel rooms results in about 250,000 condominium residents annual visitor-days in the Hotel Scenario. The 125 condominiums are estimated to accommodate an average of 88 households over the course of a year, due to the assumption that units will be occupied by a combination of Controller's Office 5 Office of Economic Analysis resident-owners (occupying the space full-time) and second home-owners or guests (occupying the space part-time). On an annual basis, the 88 households result in about 32,000 resident household days5. Number of Rooms, Units, Visitors, and Resident Population Assumptions 500 Hotel Rooms Converted to 125 Condominiums Hotel Scenario Hotel Rooms 500 x Annual Occupancy Rate * 80% x 365 =Annual Occupied Room-nights 146,183 x Hotel guests per room *'' 1.74 = Annual Hotel visitors 254,118

Condo Conversion Scenario Hotel Rooms converted 500 / Hotel Rooms per Condo Unit *''* 4 = Total Condo Units 125 x Households per unit 1 x Condominium Occupancy rate *"'* 70% = Average daily resident households 87.5 x 365 =Annual resident households 31,938

Notes and Sources: * Estimated year-end occupancy rate based on year-to-date hotel occupancy for all hotels city-wide through November 2007, per Trends in the Hotel Industry, Northern California, November 2007, PKF Consulting. *` Calculated by OEA based on 2006 hotel visitors and occupied room nights, per San Francisco Visitor Industry Economic Impact Estimates, 2006 and Trends in the Hotel Industry, Northern California, 2006, PKF Consulting. *'''' Assumes four hotel rooms (averaging 300 square feet) would be required for each condominium unit (averaging 1,200 square feet). Estimated by OEA, based on discussions with hotel industry sources and review of market data. *"`*Average percent of time throughout the year units are occupied by resident-owners, second- home-owners, or guests. Estimated by OEA based on review of owner-occupancy patterns at the St. Regis and Four Seasons Residences, per property tax data from RealQuest.com.

5 In this analysis, condominium resident spending is measured on a per household basis, while visitor spending is estimated on a per capita basis. Thus, the 32,000 "annual household population" is not directly comparable to the 254,000 annual visitor days in Table 1, because the former is calculated per household and the latter per capita. However, the difference in occupancy and density of the two scenarios is evident by comparing hotel annual "occupied room nights" (146,000) to the condominium "annual household population" (32,000), indicating that hotels can accommodate about 4.5 times as many households. This is due to different occupancy rates of the two uses, as well as the assumption that four hotel rooms are required per condominium unit

6 Controller's Office Office of Economic Analysis Spending by Hotel The tourism and hospitality industry is a major segment of Visitors San Francisco's economic base. The industry has experienced a very strong recovery since the recession of the early 2000s, with industry employment, visitors, visitor spending, room rates, airport and port traffic, and other economic indicators all trending upward in the last few years. Visitor spending on a variety of categories including lodging, dining, retail, entertainment, and transportation drives this sector of the economy.

The SFCVB publishes a survey of visitor spending by place of stay (hotel, staying with friend/relatives, and day-trippers). Table 2 below summarizes the average daily spending, by category, inflated to 2008$s, for San Francisco visitors staying in hotels. As indicated, visitors staying at San Francisco hotels spend about $305 per person per day, with about $81 of this spending accounting for purchases subject to sales taxes. Average Daily Spending — San Francisco Visitors Staying in Hotels

Spending per Spending Categories Person/ Day Lodging $ 106.27 Food and Beverage '' $ 50.63 Retail * $ 30.78 Entertainment &Sightseeing $ 27.05 Transportation $ 90.10 Daily Per Capita Spending $ 304.82 Daily Per Capita Spending subject to Sales Tax $ 81.41

Note: `Estimated portion spent on goods subject to sales tax, for use in fiscal impact assessment. Source: San Francisco Visitor Industry Economic Impact Estimates, 2006, San Francisco Convention & Visitors Bureau Education &Research Foundation, inflated to 2008$s.

Controller's Office 7 Office of Economic Analysis Spending by In the Condominium Scenario, resident spending was Condominium estimated by first calculating the minimum income required to purchase a hypothetically converted condominium unit, Residents then using the resulting income to estimate spending.

The analysis assumes that the converted condominiums are priced at the upper end of the market, with the newly created condominiums leveraging value from the affiliated hotel's brand, services and amenities. A high sales price would also be required to make a conversion financially feasible — at four hotel rooms per unit, and hotel properties valued in the range of $300,000 to $400,000 per room, a A typical converted unit hotel owner/developer would require, at a minimum, $1.2 would require a minimum million ($300,000 x 4), plus the conversion cost and profit, household income of to make the conversion pencil. $400,000 per year Sales at the St. Regis and Four Seasons residences, properties considered comparable to what could be converted in today's market, were analyzed to derive a value of $1,400 per square foot, or $1.68 million per 1,200- square-foot unit. Using traditional underwriting standards (80% loan to value ratio, 30-year term, 10-year average interest rate, etc.), a $1.68 million unit would require a minimum household income of $400,000 per year.

This income, along with the number of units and owner- occupancy assumption previously discussed, will be input into the economic model in the following section to calculate the economic and fiscal impact of the Condominium Scenarios.

6 There are various alternatives for condominium ownership, including traditional single-owner fee-simple and shared-ownership. Shared-ownership represents a hybrid of hotel and single-owner condominiums, with attributes of both uses. In terms of spending, occupancy, and density assumptions, shared-ownership units are similar to single-owner condominiums because both ownership structures would require the conversion of multiple rooms per unit. However, because prices of fractions of shared-owner units are lower than a whole unit, the income (and spending) profiles of its occupants would be different. Shared-ownership projects are similar to hotels in that units are generally made available for transient guests during the sell-out phase (which can take up to 5 years), and even after sell-out, some owners opt to make their units available through the a~liated hotel. Thus, hotel occupancy tax could be collected to the extent these shared-ownership units are made available and occupied by transient guests. Although a separate analysis was not conducted on a shared-ownership alternative, the economic and fiscal impacts are projected to be similar to the Condominium Scenario. This is because the inclusion of some hotel tax revenue generated by an indeterminate number of fractional units would be offset by projected lower spending by fractional owners compared to individual condominium owners, due to different household income and spending profiles.

8 Controller's Office Office of Economic Analysis Construction Impacts The conversion of hotel units to condominiums will also result in one-time construction-related impacts, as well as fiscal impacts in associated with initial unit sales in the form of property transfer tax. Construction costs to convert the units were estimated at about $210 per square foot, or $31.5 million for the 125 converted condominiums.

Controller's Office 9 Office of Economic Analysis ECONOMIC IMPACT ASSESSMENT

Direct Spending Table 3, below, calculates the direct annual spending Impacts impacts under the two scenarios, based on the assumptions presented in Tables 1 and 2. As indicated, the Hotel Scenario is estimated to generate about $77.5 million in direct spending annually, while the Condominium Scenario results in about $35 million in annual income or spending potential.

Annual Direct Spending — 500 Hotel Rooms vs. 125 Condominium Units

Hotel Scenario (500 Rooms) Annual Hotel visitors 254,118 x Spending per Visitor per Day ** $ 305 = Annual Direct spending impact $ 77,461,132

Condominium Scenario (125 Units) Average daily household population * 88 x Annual Household Income $ 400,000 = Annual Direct spending impact $ 35,000,000

Notes and Sources: " Based on hotel occupancy of 80% and condominium occupancy of 70%. See Table 1. *" See Table 2.

10 Controller's Office Office of Economic Analysis Direct and Indirect Table 4 summarizes the direct, indirect, and employment Spending and impacts under the two scenarios. As indicated, the Hotel Scenario is estimated to generate about $118 million in Employment Impacts direct and indirect spending in San Francisco, or about $74 million more than the Condominium Scenario.

The OEA used the IMPLAN model—a statistical model of the San Francisco economy—to produce quantitative estimates of the full economic impact of the two scenarios.

The IMPLAN model captures variances in spending patterns by residents and visitors, resulting in different spending multipliers for the two land uses. As shown, the spending multiplier by visitors in the Hotel Scenario is 1.53, meaning that for each dollar spent, an additional $0.53 is captured locally as the spending flows through the City's economy. In contrast, the resident spending multiplier is 1.28, ($0.28 of indirect spending per dollar of direct spending), or about half of the indirect spending multiplier of visitors. More visitor spending stays in the local economy compared with resident expenditures because of different spending leakage. For example, visitors are more likely to spend money locally on local services with a higher multiplier effect. In contrast, residents spend significantly on items with low local multipliers, such as financial services, real estate, telecom, medical services, as well as savings and investment, money that leaks out of the San Francisco economy.

Spending by visitors in the Hotel Scenario supports nearly 1,700 direct and indirect jobs in the San Francisco economy, or about 22 jobs per $1 million in direct spending. In contrast, the Condominium Scenario is estimated to support 255 jobs, or about 7 jobs per $1 million in direct spending.

Controller's Office 11 Office of Economic Analysis Direct, Indirect and Employment Impacts —

Gross City Employment Effect ** 1,691 255 1,436 Employment per $1 M in Direct Spending "*"* 21.82 7.27 14.55

Notes and Sources: See Table 3. ** Includes multiplier impacts as spending is recycled throughout the San Francisco economy. Source: IMPLAN. `*" Ratio of Direct and Indirect Spending/Direct Spending ''*'" Gross City Employment $1

12 Controller's Office Office of Economic Analysis Fiscal lmpact Table 5 summarizes the projected annual direct fiscal Assessment revenues to the City and its General Fund under both scenarios, as well as the assumptions used in the analysis. The major tax revenues considered include transient occupancy taxes (TOT), sales taxes from visitor or resident spending, property taxes, and property transfer taxes. The Hotel Scenario is estimated to generate estimated to generate As indicated, the Hotel Scenario is nearly $6.0 million in tax revenue to the City annually, more nearly $6.0 million in tax than twice the $2.4 million tax revenue projected under the revenue to the City Condominium Scenario. Annual General Fund tax revenues annually, more than twice are projected at $3.4 million for the Hotel Scenario and $1.4 the $2.4 million tax million for the Condominium Scenario. revenue projected under TOT was estimated by applying citywide average daily room the Condominium and occupancy rates to the 500-room hotel to calculate Scenario annual room revenue subject to the City's 14% hotel tax. As indicated, the Hotel Scenario would generate $2.1 million in TOT, while no TOT would be collected in the Condominium Scenario.

Hotel uses generate The City's share of sales tax from hotel visitors was comparatively more fiscal estimated by applying the City's 2% portion of the sales tax revenue to the City than to the portion of visitor spending on taxable dining and retail rgvi residential uses, primarily hotel vistors81 esul~tn int$4p4 OOOyin sals ll taxb evenuel because hotel occupancy Frith half accruing to the General Fund. is subjecf to transient occupancy tax Sales taxes from residents in the Condominium Scenario were estimated based on a review of spending output, by category, generated by the IMPLAN model for the income cohort of projected homeowners. Based on these data, the OEA estimates that approximately 11.8% of resident spending is taxable and captured by San Francisco retailers. This equates to about $47,000 per occupied household per year, or $4.13 million in annual taxable spending in San Francisco, resulting in $83,000 in total sales tax revenue, with half going to the General Fund.

Property taxes were estimated based on a valuation of $350,000 per hotel room (the lower end of recent hotel sales), or $175 million for the Hotel Scenario. As previously discussed, residential values were estimated at $1.68 million

See Tables 1 and 2. Controller's Office 13 Office of Economic Analysis per unit, for a total of $210 million in the Condominium Scenario.

Although properties do not typically sell every year, property transfer taxes were estimated on an annual basis under the assumption that commercial properties sell every 10 years, and residential properties change hands every 7 years, on average. Thus, 10% (1/10) of the total assessed value of the hotel and 14% (1/7) of the total condominium value is assumed "transferred" annually, for analytical purposes

The Condominium Scenario would also result in one-time transfer tax revenues of about $1.6 million to the General Fund from the initial sale of the 125 condominium units, while the Hotel Scenario would not generate one-time transfer taxes.

14 Controller's Office Office of Economic Analysis Direct Annual Fiscal Revenues — 500 Hotel Rooms vs. 125 Condominium Units

Annual Tax Revenue to General Fund Hotel Condominimum Transient Occupancy Tax (1) $2,100,823 $0 Sales Tax (2) $206,875 $41,315 Property Tax (3) $991,997 $1,190,396 Pro ert Transfer Tax 4 $131,250 $225,000 TOTAL ANNUAL REVENUE TO GENERAL FUND $3,430,945 $1,456,711 Annual Revenue to Other Funds $2,543, 255 $950,918 TOTAL ANNUAL REVENUE to SF FUNDS $5,974,201 $2,407,629

Notes and Assumptions (1) Transient Occupancy Tax (TOTI Hotel Rooms 500 x Average Daily Room Rate (perPrcF) $180 x Occupancy Rate (perPKF) 80.0°/a Annual Room Revenue $26,280,000 x TOT Rate 14.00% Total Tax Revenue 3,679,200 x TOT Allocation to General Fund (per 200-08 budget) 57.10% Total GF Revenue 2,100,823 0 Total Other Fund Revenue $1,578,377 $0 (2) Sales Taxes From Visitor and Resident Spendin Annual Hotel Visitors (see Table ~) 254,118 x Taxable Retail Spendin per Visitor per Da (see table 2) $81.41 Annual Taxable Spending 20,687,532 x Sales Tax Rate to SF Funds (General, transit, schools) 2% Total Sales Tax Revenue to SF 413,751 x Sales Tax Allocation to General Fund (1 %rate) 50% TT~Z~` evenue ~€~7 Total Other Fund Revenue $206,875 Occupied Households (see Tab~e 1) 88 x Taxable Retail Spending per HH per Year (~~.si incomespenriocauy, perIMPLAN) $47,217 Annual Taxable Spending $4,131,456 x Sales Tax Rate to SF Funds (General, transit, schools) 2% Total Sales Tax Revenue to SF 82,629 x Sales Tax Allocation to General Fund (1 %rate) 50% Tota evenue ~i;$'f~ Total Other Fund Revenue $41,315 (3) Property Taxes Condo Sales Price -per Sq.Ft. $1,400 Average Size per Unit (sq.ft.) 1,200 Value per Hotel Room/ Condo Unit $350,000 $1,680,000 x Number of Rooms/Units 500 125 ota ssesse a ue x Base Property Tax Rate (excludes bond overides) 1.00% 1.00% Total Tax Revenue 1,750,000 $2,100,000 x Pro ert Tax Allocation to General Fund (0~-08 avocation) 56.69% 56.69% ota avenue 9 7 90, Total Other Fund Revenue $758,003 $909,604 (4) Property Transfer Taxes Total Assessed Value $175,000,000 $210,000,000 x Property Turnover Rate (for annual transfer tax) 10% 14% Annual Property Value "Transferred" 17,500,000 30,000,000 x Transfer Tax Allocation to General Fund 0.75% 0.75% Total GF Revenue $131,250 $225,000 Controller's Office 15 Office of Economic Analysis RISK FACTORS AND MITIGATION

Introduction Despite the overall positive economic impacts of the legislation, mitigating actions can be undertaken to reduce risk: 1. Because real estate markets are cyclical, consider revisiting legislation periodically (at each economic cycle) to determine if it is still needed. 2. Better define the supply of Large Tourist Hotels to guide the Planning Department when it evaluates potential future conversions. The legislation stipulates that the Planning Commission "may further approve hotel rooms to be Converted if the applicant can demonstrate that such Conversion will not reduce the supply of Large Tourist Hotel rooms in the City"...and that the "Planning Department may take into consideration Large Tourist Hotels under construction at the time of the application." Rather than only considering rooms under construction at the time of application, the OEA suggests setting a baseline quantity of Large Tourist Hotel rooms tied to existing inventory as tracked by a hotel consulting firm, such as PKF or Smith Travel Research. Future additions or subtractions of rooms could be tied to this baseline inventory and used by the Planning Commission when it evaluates future conversions. This process would mitigate against real estate market cycles which may run counter (i.e., planning and construction cycles may not synch up for hotel and condominium uses at a time when a change of use may be warranted). 3. Consider expanding the legislation to prohibit shared ownership at all large tourist hotels, rather than exempting only new mixed-use (residential and hotel) projects. 4. The legislation could discourage new hotel development because it restricts a potential exit strategy if the developer/investor grossly miscalculated the market or a negative externality impacts demand (e.g., 9/11). The OEA suggests allowing atwo-year window to exempt new hotels from the ordinance to leave an out, and not discourage investment in the City.

16 Controller's Office Office of Economic Analysis STAFF CONTACTS

Kurt Fuchs, Senior Economist (kurt.fuchs(c~sfgov.orq)(415) 554-5369 Ted Egan, Chief Economist (ted.egan(a~sfgov.orq)(415) 554-5268

The OEA would like to thank Thomas Callahan of PKF Consulting, and the San Francisco Hotel Council for their assistance with this report. All errors, omissions, and conclusions are solely the responsibility of the Office of Economic Analysis and Controller's Office.

Controller's Office 17 Office of Economic Analysis CITY AND COUNTY OF SAN FRANCISCO -CONTROLLER'S OFFICE

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Controller's Office 19 Office of Economic Analysis Exhibit A: 2011 Annual Inventory CASE NO. 2011.0021 U Hearing Date: 3/3/11 Annual Inventory of Large Tourist Hotel Rooms

Proposed for the Planning Commission at the March 3, 2011 Hearing Case Number 2011.0021 U

Note: Section 41 F.2(i) defines Large Tourist Hotels as a building (or set of buildings on the same lot, adjacent lots, or within the same block and owned by the same entity) which would have qualified as a Large Tourist Hotel in any of the five years preceding the application for Conversion.

Na. of Urge , Hotel Tourist Ho#el No. Hotel Name Address Zip Cade Rooms 1 Air Travel Hotel 655 Ellis ST 94109 100 2 Shih Yu-Lang Central YMCA 220 Golden Gate AVE 94102 100 3The Monarch Hotel 1015 Geary ST 94109 101 4 Orchard Hotel 665 Bush ST 94108 104 San Francisco Bayside 5 Travelodge 2011 Bayshore BLVD 94134 104 6 The Herbert Hotel 161 Powell ST 94102 104 7 Hotel Metropolis 25 Mason ST 94102 105 8 Executive Hotel Vintage Court 650 Bush ST 94108 107 9 Hotel Juliana 590 Bush ST 94108 107 10 Hotel Milano 55 Fifth ST 94103 108 11 Campton Place, A Taj Hotel 340 Stockton ST 94108 110 12 Commodore Hotel"` 825 Sutter ST 94109 110 13 Hotel Diva 440 Geary ST 94102 111 14 Beresford Hotel 635 Sutter ST 94102 114 The Cartwright Hotel on Union 15Square 524 Sutter ST 94102 114 16 Hotel Mark Twain 345 Taylor ST 94102 118 17 New Central Hotel &Hostel 1412 Market ST 94102 122 18 Best Western Hotel Tomo 1800 Sutter ST 94115 125 Courtyard by Marriott, San 19 Francisco-Fisherman's Wharf 580 Beach ST 94133 127 20 Shawmut Hotel 516 O'Farrell ST 94102 128 21 Cow Hollow Motor Inn &Suites 2190 Lombard ST 94123 129 22 Harbor Court Hotel 165 Steuart ST 94105 131 23 Hotel Union Square 114 Powell ST 94102 131 24 Spaulding Hotel 240 O'Farrell ST 94102 132 25 Heritage Marina Hotel 2550 Van Ness AVE 94109 135 26 Renoir Hotel San Francisco 45 McAllister ST 94102 135 The Huntington Hotel &Nob Hill 27Spa 1075 California ST 94108 135 28 The Powell Hotel 28 Cyril Magnin ST 94102 135

29 Chancellor Hotel on Union Square 433 Powell ST 94102 137 30 Comfort Inn By the Bay 2775 Van Ness AVE 94109 138 31 Marines' Memorial Club &Hotel 609 Sutter ST 94102 138

Page 1 of 4 Exhibit A: 2011 Annual Inventory CASE NO. 2011.0021 U Hearing Date: 3/3/11 Annual Inventory of Large Tourist Hotel Rooms

Proposed for the Planning Commission at the March 3, 2011 Hearing Case Number 2011.0021 U

'°~ ~ ~ 6 No. of Large Hotel Tourist Ho#el No. Hotel Name Address Zip Code Rooms 32 Hotel Triton 342 Grant AVE 94108 140 33 Best Western Americania 121 Seventh ST 94103 143 34 Hotel Cosmo 761 Post ST 94109 144 35 St. Paul Hotel 935 Kearny ST 94133 149 36 King George Hotel 334 Mason ST 94102 153 37 The Maxwell Hotel 386 Geary ST 94102 153 94104- 38 Mandarin Oriental, San Francisco 222 Sansome ST 2792 158 39 Hotel Carlton 1075 Sutter ST 94109 161 40 Prescott Hotel 545 Post ST 94102 164 41 The Mosser Hotel 54 Fourth ST 94103 166 The Opal San Francisco/ Hotel 42 Richelieu 1050 Van Ness AVE 94109 168 43 Hotel Adagio 550 Geary ST 94102 169 44 Aida Hotel 1087 Market ST 94103 174 45 Galleria Park Hotel 191 Sutter ST 94104 177 94102- 46 Villa Florence Hotel 225 Powell ST 2205 183 47 The Pickwick Hotel 85 Fifth ST 94103 189 48 Hotel Palomar 12 Fourth ST 94103 195 49 Hotel Vitale Eight Mission ST 94105 199 50 Hotel Monaco 501 Geary ST 94102 201 51 Hotel Kabuki 1625 Post ST 94115 218 Best Western Tuscan Inn at 52 Fisherman's Wharf 425 North Point ST 94133 221 Hilton San Francisco Fisherman's 53 Wharf 2620 Jones ST 94133 234 54 Serrano Hotel 405 Taylor ST 94102 236 Argonaut Hotel -Maritime 55 National Historical Park 495 Jefferson ST 94109 252 Holiday Inn Express Hotel & 56Suites Fisherman's Wharf 550 North Point ST 94133 252 The Best Western Canterbury 57 Hotel Union Square 750 Sutter ST 94109 254 94103- 58 St. Regis Hotel, San Francisco 125 Third ST 3107 260

Page 2 of 4 Exhibit A: 2011 Annual Inventory CASE NO.2011.0021 U Hearing Date: 3/3/11 Annual Inventory of Large Tourist Hotel Rooms

Proposed for the Planning Commission at the March 3, 2011 Hearing Case Number 2011.0021 U

Nt~.'af Large Hotel Tourist Hatel No. Hotel Name Address Zip Code » Rooms Four Seasons Hotel San 59 Francisco 757 Market ST 94103 277 San Francisco Marriott 60 Fisherman's Wharf 1250 Columbus AVE 94133 285 61 Hyatt at Fisherman's Wharf 555 North Point ST 94133 313 94108- 62 The Ritz-Carlton, San Francisco 600 Stockton ST 2305 336

63 JW Marriott Hotel San Francisco 500 Post ST 94102 337 64 Club Quarters Hotel 424 Clay ST 94111 346 Radisson Hotel Fisherman's 65 Wharf 250 Beach ST 94133 355 Le Meridien San Francisco /Park 66 Hyatt 333 Battery ST 94111 360 67 Omni San Francisco Hotel 500 California ST 94104 362 68 Clift 495 Geary ST 94102 363 69 Handlery Union Square Hotel 351 Geary ST 94102 377 Intercontinental Mark Hopkins 70 San Francisco One Nob Hill 94108 380 71 Holiday Inn Civic Center 50 Eighth ST 94103 391 The Stanford Court, A 72 Renaissance Hotel 905 California ST 94108 393 73 Marriott Union Square 480 Sutter ST 94108 400 74 Hotel W San Francisco 181 Third ST 94103 404 San Francisco Downtown 75 Courtyard by Marriott 299 Second ST 94105 405 76 Sir Francis Drake Hotel 450 Powell ST 94102 417 77 Hotel Whitcomb 1231 Market ST 94103 460 78 Holiday Inn Golden Gateway 1500 Van Ness AVE 94109 499 79 Sheraton Fisherman's Wharf 2500 Mason ST 94133 529 80 Hotel Nikko San Francisco 222 Mason ST 94102 532 Hilton San Francisco Financial 81 District 750 Kearny ST 94108 544 82 Intercontinental San Francisco 888 Howard ST 94103 550

Page 3 of 4 Exhibit A: 2011 Annual Inventory CASE NO. 2011.0021 U Hearing Date: 3/3/11 Annual Inventory of Large Tourist Hotel Rooms

Proposed for the Planning Commission at the March 3, 2011 Hearing Case Number 2011.0021 U

No. of Large.' Hotel To.urist_Hotel No. R Hotel Name Address. Zip Code °' Rooms Two New Montgomery 83 Palace Hotel -Luxury Collection ST 94105 552 84 Holiday Inn Fisherman's Wharf 1300 Columbus AVE 94133... 585 85 The Fairmont San Francisco 950 Mason ST 94108. 591 The Westin San Francisco 86 Market Street 50 Third ST 94103 675 87 Grand Hyatt San Francisco 345 Stockton ST 94108 683 Five Embarcadero 88 Hyatt Regency San Francisco Center 94111 805 94102- 89 Parc 55 Hotel San Francisco 55 Cyril Magnin ST 2865 1010 90 The Westin St. Francis 335 Powell ST 94102 1196 91 San Francisco Marriott 55 Fourth ST 94103 1498

92 Hilton San Francisco 333 O'Farrell ST 2116 1908 Total Large Tourist Hotel Rooms 27,926

'`NOT~:'~ Hotel number 12 in this list is the Commodore Hotel. This property is,currently leased by Academy of Art and is operated as group housing for apost-secondary education Institution. A Conditional Use authorization (20Q8.0586C) has been filed to legalize this change of use. At the February 12, 2009 Hearing, the Planning Commission noted`this pending CU and decided to include the Commodore Hotel in the Baseline Inventory with caveat that if the Commission approves the CU request, the Commodore's rooms can be removed from the Baseline Inventory without causing a loss in the number of hotel roams in the adopted Baseline Inventory. If the Commission disapproves the CU, the Commodore's rooms are to remain in the City'sBaseline Inventory.

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